Australia's main wool price indicator hit a five and a half year high this week as demand spiked due to supply concerns among major buyers.

The Australian Wool Exchange has reported that its Eastern Market Indicator reached 1413 cents on Wednesday, with the trade reporting strong demand from China, Europe and India for quality Merino wools.

Australian Wool Network auctioneer Kelvin Shelley said the market this week was one of the best he had sold into in a long, long time.

He said AWN held a tender sale of more than 2,000 bales after the last AWEX auction sale just before Christmas, providing some Christmas cheer for growers whose shearings had missed sales after being held up by wet weather. About 16 exporters submitted prices in the sale, the first of its size held by AWN before Christmas.

"It showed that most Merino fleece types were at least 20-30 cents a kilogram dearer than the final quotes for the final 2016 AWEX week 24 sale, although crossbreds were 10-15 cents cheaper.

"That basis has gone straight into this week and there has probably been more business done since then; during the Christmas New Year period there has been a number of orders placed, especially out of China," Shelley said.

"With the offerings at the moment, you are looking at 52,000-55,000 bales, but 50-56 percent of it is crossbred fleece and crossbred lambs. You take out the Merino skirtings, the crossbred fleece, crossbred cardings and lambs and the Merino cardings, you are actually not left with much Merino fleece at all. The volume of wool is actually not there in the better quality types," said Shelley. "For months and months we have been saying it is going to dry up at some point and I think that's what we are starting to see now."

Shelley said prices jumped on Tuesday, continued on Wednesday and were firmer on Thursday.

"But a lot of the times when you see markets like this, you usually see a pretty quick turnaround within a few weeks. It usually only lasts two to three weeks and all of a sudden it drops away again and corrects itself," he said.

"Speaking to most of the exporters over the last couple of days, they believe with that volume issue, this could be around for three or four weeks or more."

Reprinted in part from Sheep Central

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